Power sector subsidy up 10 times in 7-yr

Mahfuz Emran: Government expenditure in the subsidy sector has been increasing in the budget for several years. However, very little of this subsidy goes to agriculture or other productive sectors. Instead, every year a large part of the subsidy goes to the power sector. Because the government’s losses in this sector are increasing every year. For two fiscal years, more than half of the government’s total subsidy is going to the power sector.
In other years, the subsidy in this sector was more than 40 percent of the total subsidy. This information came out in the publication titled ‘Medium Term Macroeconomic Policy Statement: 2024-25 to 2026-27’ published by the Finance Department. It was released on June 6 as a companion publication to the proposed budget for the fiscal year 2024-25.
It can be seen that the subsidy in power sector has increased almost 10 times in seven years. However, due to International Monetary Fund (IMF) loan conditions, the government wants to exit the power sector subsidy. For this reason, it is planned to increase the price four times a year. Through this, the subsidy in the power sector will be reduced to zero in the next three years.
According to the information of the Finance Department, the subsidy expenditure of the Finance Department in the financial year 2017-18 was Tk 8,570 crores. Out of this, Tk 3,550 crore was given to Power Development Board or PDB. That is, 41.42 percent of the total subsidy was received by the power sector. Apart from this, Tk 1,415 crores in food and Tk 3,605 crores in gas and other sectors are given as subsidy.
In the next financial year, the government has to spend almost twice as much money for the subsidy in the power sector. In the financial year 2018-19,
the subsidy expenditure of the government increased to Tk 13,550 crores. Of this, Tk 7,966 crores have to be paid in the electricity sector. That is, the power sector receives 58.79 percent of the government’s subsidy allocation. In that fiscal year, the government’s subsidy expenditure on food was Tk 3,740 crore and on gas and other sectors Tk 2,514 crore.
In the financial year 2019-20, the subsidy expenditure of the government increased, but it decreased slightly in the power sector. The total subsidy expenditure of the government in that financial year was Tk 15,120 crores. Out of this, Tk 7,439 crores or 49.20 percent is received by the power sector. And Tk 4,170 crores in food and Tk 3,516 crores in gas and other sectors.
In the next two fiscal years, the government’s subsidy expenditure increased significantly. However, the electricity sector did not receive the subsidy in that proportion. As a result, there has been a proportional reduction in the subsidy in the power sector. Out of this, the subsidy expenditure of the government in the fiscal year 202021 was Tk 19,230 crore, of which 46.52 percent or Tk 8,945 crore was spent on the power sector. And food subsidy is Tk 4,987 crore and gas and other sectors Tk 5,297 crore.
In the next financial year, the subsidy expenditure of the government increased to Tk 27,530 crores. Out of this, Tk 11,960 crore or 43.44 percent was given to the power sector. In that financial year, the allocation for food subsidy was Tk 6,345 crores and Tk 9,226 crores for gas and other sectors. However, the next fiscal saw a record increase in subsidies to the power sector.
In the financial year 2022-23, the subsidy expenditure of the government increased to Tk 44,723 crores. Out of this, Tk 29,511 crore or about 66 percent of subsidy is given to electricity sector. In that financial year, the subsidy expenditure in the power sector jumped to almost two and a half times. And in the fiscal year 2022-23, subsidies of Tk 6,416 crore were given in food and Tk 8,796 crore in gas and other sectors.
Meanwhile, according to the revised budget of the financial year that is about to end, the subsidy expenditure of the government for the financial year 2023-24 has increased to Tk 60,667 crores, of which Tk 35 thousand crores or 57.69 percent has been given to the power sector. According to this, the subsidy expenditure of the government in the power sector has increased to about 9.86 times in the last seven years. In addition, in the last fiscal year, food subsidy was given to the tune of Tk 7,620 crores and Tk 18,347 crores went to gas and other sectors.